Legislature(2017 - 2018)Anch LIO Conf Rm

09/07/2017 02:00 PM LEGISLATIVE BUDGET & AUDIT

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Audio Topic
02:03:11 PM Start
02:04:41 PM Election of Chairman
02:05:16 PM Approval of Agenda
02:05:45 PM Approval of Minutes
02:06:36 PM Special Audit Request
02:35:37 PM Executive Session
04:02:53 PM Final Audit Release
04:03:54 PM Preliminary Audit Release
04:04:26 PM Other Committee Business
04:05:20 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Special Audit Request TELECONFERENCED
- Village Public Safety Officer
Executive Session:
Final Audit Release
- Real Estate Commission (sunset)
- Board of Marital and Family Therapy (sunset)
- Board of Professional Counselors (sunset)
- FY 16 Single Audit
Preliminary Release
- Board of Certified Real Estate Appraisers
Other Committee Business
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                       Anchorage, Alaska                                                                                        
                       September 7, 2017                                                                                        
                           2:03 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Bert Stedman, Chair                                                                                                     
Senator Anna MacKinnon                                                                                                          
Senator Cathy Giessel                                                                                                           
Senator Lyman Hoffman (via teleconference)                                                                                      
Senator Natasha von Imhof (alternate)                                                                                           
                                                                                                                                
Representative Andy Josephson, Vice Chair                                                                                       
Representative Scott Kawasaki (via teleconference)                                                                              
Representative Ivy Spohnholz                                                                                                    
Representative Jennifer Johnston                                                                                                
Representative Dan Ortiz (alternate, via teleconference)                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Click Bishop                                                                                                            
                                                                                                                                
Representative Paul Seaton                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
ELECTION OF CHAIRMAN                                                                                                            
APPROVAL OF AGENDA                                                                                                              
APPROVAL OF MINUTES                                                                                                             
SPECIAL AUDIT REQUEST                                                                                                           
EXECUTIVE SESSION                                                                                                               
FINAL AUDIT RELEASE                                                                                                             
PRELIMINARY AUDIT RELEASE                                                                                                       
OTHER COMMITTEE BUSINESS                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE DAN SADDLER                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Requested  an audit  of the  Village Public                                                             
Safety Officer program.                                                                                                         
                                                                                                                                
KRIS CURTIS, Legislative Auditor                                                                                                
Legislative Audit Division                                                                                                      
Legislative Agencies and Offices                                                                                                
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Provided comments  and answered  questions                                                             
during the special audit request.                                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:03:11 PM                                                                                                                    
                                                                                                                                
CHAIR  BERT  STEDMAN  called the  Legislative  Budget  and  Audit                                                             
Committee  meeting  to  order  at   2:03  p.m.    Representatives                                                               
Kawasaki   (via  teleconference),   Spohnholz,  Johnston,   Ortiz                                                               
(alternate,  via  teleconference),  and  Josephson  and  Senators                                                               
MacKinnon,  Giessel, Senator  Von Imhof  (alternate) and  Stedman                                                               
were  present  at  the  call  to order.    Senator  Hoffman  (via                                                               
teleconference) arrived as the meeting was in progress.                                                                         
                                                                                                                                
^ELECTION OF CHAIRMAN                                                                                                           
                      ELECTION OF CHAIRMAN                                                                                  
                                                                                                                              
2:04:41 PM                                                                                                                    
                                                                                                                                
VICE CHAIR JOSEPHSON  moved to elect Senator Stedman  as chair of                                                               
the  Legislative Budget  and  Audit Committee.    There being  no                                                               
objection,  the  election of  Senator  Stedman  as chair  was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
^APPROVAL OF AGENDA                                                                                                             
                       APPROVAL OF AGENDA                                                                                   
                                                                                                                              
2:05:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  made  a motion  that  the  Legislative                                                               
Budget and  Audit Committee approve  the agenda.  There  being no                                                               
objection, it was so ordered.                                                                                                   
                                                                                                                                
^APPROVAL OF MINUTES                                                                                                            
                      APPROVAL OF MINUTES                                                                                   
                                                                                                                              
2:05:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON made a motion  to approve the minutes of                                                               
the  Legislative Budget  and Audit  Committee of  July 25,  2017,                                                               
with the following correction of  the word "lasting" to "lapsing"                                                               
as it appeared three times on  page 4.  There being no objection,                                                               
the minutes from the meeting of  July 25, 2017, were approved, as                                                               
corrected.                                                                                                                      
                                                                                                                                
^SPECIAL AUDIT REQUEST                                                                                                          
                     SPECIAL AUDIT REQUEST                                                                                  
                                                                                                                              
2:06:36 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN announced that the  next order of business would be                                                               
a special audit request.                                                                                                        
                                                                                                                                
2:07:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAN  SADDLER, Alaska State  Legislature, requested                                                               
an audit  of the  Village Public  Safety Officer  (VPSO) program.                                                               
He  stated that  he serves  on  the House  Finance Public  Safety                                                               
Subcommittee, and  during work  on the fiscal  year 2018  (FY 18)                                                               
operating  budget,   he  had   raised  questions   regarding  the                                                               
management  and financing  of  the  VPSO program.    He said  the                                                               
Department of  Public Safety  gave him  budget data  and answered                                                               
some  questions;  however,  he  said he  feels  a  more  detailed                                                               
analysis  related  to  expenses  and  contractual  obligation  is                                                               
necessary.                                                                                                                      
                                                                                                                                
REPRESENTATIVE SADDLER offered a  background of the VPSO program,                                                               
which started  in 1979 but  has not been  audited in the  past 14                                                               
years, since  2003.  He said  there has been a  steady decline in                                                               
the  average number  of VPSOs  employed in  Alaska -  the current                                                               
number is  52.  Since  1996, he  reported, the turnover  rate has                                                               
been almost  95 percent.   He expressed  another concern  is that                                                               
those hired  in the VPSO  program have no  contractual obligation                                                               
to  take  the  job;  there  are cases  wherein  VPSOs  have  been                                                               
trained, at  the state's  expense, " only  to turn  around pretty                                                               
quickly after  graduation and take jobs  with other [employers]."                                                               
He suggested that may not be  the best way to spend state dollars                                                               
to ensure the hire of Alaskans to improve public safety.                                                                        
                                                                                                                                
2:09:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER stated  that the  VPSO program  is funded                                                               
100 percent  by undesignated  general funds.   He opined  that in                                                               
Alaska's current fiscal  situation, it is important  to spend the                                                               
state's  dollars "wisely  and appropriately  and prudently."   He                                                               
stated, "It's  especially fitting to  look at this  program, when                                                               
the dollars budgeted  and the positions authorized  so far exceed                                                               
the number of VPSOs actually doing the job."                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  said he  thinks the funding  process also                                                               
needs  review.   Currently, there  are 10  grantees, who  receive                                                               
most  of their  funds in  the fiscal  year cycle,  even when  the                                                               
funded  positions are  not  even filled,  which  he remarked  may                                                               
actually  incentivize  grantees  to not  fill  vacant  positions,                                                               
because  under  current  operations,  they can  retain  funds  in                                                               
excess  of their  actual expenses  and "spend  them for  purposes                                                               
that may be  only peripherally related to the VPSO  program."  He                                                               
stated  that [the  legislature's] responsibility  related to  the                                                               
public  employees' retirement  system  (PERS) is  to ensure  that                                                               
money is spent on intended purposes, not marginally so.                                                                         
                                                                                                                                
REPRESENTATIVE SADDLER  acknowledged that audits cost  money, but                                                               
he thinks an audit of the  VPSO program is justified, because the                                                               
public has high  expectations of the program,  which he described                                                               
as  "near and  dear, especially  to rural  legislators and  their                                                               
constituents  - the  residents of  Bush  Alaska."   He said  [the                                                               
program] provides an important role  in providing public services                                                               
in [rural]  areas without "intrinsic, local  police departments."                                                               
He  related  that  the  state  spent $18  million  [on  the  VPSO                                                               
program] in  2015 and  "now it's  about $14  million."   He said,                                                               
"That's $185,000 per  VPSO per year.  We need  to make sure those                                                               
dollars are being expended prudently."   He emphasized the strong                                                               
possibility   that  an   audit  could   result  in   savings  and                                                               
efficiencies  in the  VPSO program,  and "that  information would                                                               
help  inform  our efforts  and  your  efforts to  improve  public                                                               
safety in rural Alaska."                                                                                                        
                                                                                                                                
2:11:51 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN suggested the target  time for [the audit] would be                                                               
about 1.5  years, and  he indicated  that a  conversation between                                                               
the  Legislative  Budget   and  Audit  Committee,  Representative                                                               
Saddler,  and  the  chairs  of   the  House  and  Senate  Finance                                                               
Committees could take place during  that waiting time in order to                                                               
address any questions that may arise and "refine this a little."                                                                
                                                                                                                                
2:12:51 PM                                                                                                                    
                                                                                                                                
VICE CHAIR JOSEPHSON  noted that the operating budget  from FY 17                                                               
had  intent  language   that  stated  that  the   intent  of  the                                                               
legislature was that  "the VPSO program grantees  be permitted to                                                               
charge  their  federally approved  indirect  cost  to their  VPSO                                                               
program grant, provided the statewide  average does not exceed 30                                                               
percent."   He  referred to  Representative Saddler's  mention of                                                               
the  $185,000   and  asked,  "Should   the  audit   move  forward                                                               
consistent with that intent language?"                                                                                          
                                                                                                                                
REPRESENTATIVE SADDLER answered  that he would like  the audit to                                                               
be "wide range  and ask those kinds of questions."   He said that                                                               
in  looking  at  "the  history  of  the  VPSO  program,"  it  was                                                               
"telling"  that   there  has   been  a   "quasi  audit   done  by                                                               
[Legislative]  Audit  at  that time,  which  indicated  that  the                                                               
indirect costs  were between 17 and  28 percent, and in  the most                                                               
recent budget year we have  they're basically 27-28 percent."  He                                                               
said he hoped it  would not reach 30 percent.   He said he thinks                                                               
the intent language has been  constructive and gives direction to                                                               
the   legislature;   however,   he   said   he   encouraged   the                                                               
legislature's  seeking  opportunities to  keep  costs  as low  as                                                               
possible.                                                                                                                       
                                                                                                                                
VICE  CHAIR JOSEPHSON  indicated  that a  report  related to  the                                                               
operating budget of  2017 states an intent to  expand the program                                                               
into additional  rural areas.   He asked  Representative Saddler,                                                               
"So,  there's nothing  about the  audit that  is designed  to run                                                               
counter to that intent, in your mind?"                                                                                          
                                                                                                                                
REPRESENTATIVE  SADDLER answered,  "Certainly not."   He  said he                                                               
wants to  ensure the  VPSO program  is running  "successfully and                                                               
efficiently" and  is serving rural  Alaskans well.   He expressed                                                               
his hope  that by  finding efficiencies, it  would be  easier for                                                               
the  legislature, as  budgeters, to  expand the  program to  more                                                               
communities.                                                                                                                    
                                                                                                                                
VICE  CHAIR  JOSEPHSON noted  that  in  the second  paragraph  of                                                               
Representative  Saddler's  letter  requesting the  audit,  it  is                                                               
written that the audit "should  evaluate the degree that the VPSO                                                               
program has  been effective at  providing public  safety services                                                               
to rural  Alaska villages."   He  said it strikes  him that  is a                                                               
tough  thing to  determine, because  that would  require weighing                                                               
"what the absence  of the program would look like."   He asked if                                                               
that  was  language that  Representative  Saddler  and his  staff                                                               
could "hone in some way."                                                                                                       
                                                                                                                                
REPRESENTATIVE  SADDLER  answered  that the  premise  upon  which                                                               
audits  are done  is the  determination of  whether programs  are                                                               
"operating to achieve  their desired end," and he  thinks that is                                                               
appropriate.   He noted that  further in the paragraph  there are                                                               
more specific metrics, including:   turnover rates, average years                                                               
of  experience, and  number of  filled positions.   He  named the                                                               
degree to which search and  rescue is operating and public safety                                                               
is being provided,  as well as the number of  unsolved crimes, as                                                               
possible areas for  which "we can actually put ...  some edges on                                                               
that request," while "keeping the overall directive."                                                                           
                                                                                                                                
2:16:49 PM                                                                                                                    
                                                                                                                                
SENATOR MACKINNON  asked Representative Saddler if  he had worked                                                               
with the  state auditor in  the process of bringing  forward this                                                               
audit request.                                                                                                                  
                                                                                                                                
REPRESENTATIVE SADDLER  answered yes,  to have  general questions                                                               
narrowed down to "more achievable, measureable points."                                                                         
                                                                                                                                
SENATOR MACKINNON said she served  on [the Legislative Budget and                                                               
Audit  Committee]  for at  least  six  years,  and she  said  the                                                               
process [for requesting audits] is  to bring something before the                                                               
full  committee and  for the  committee  to hear  from the  state                                                               
auditor.   She  said she  supports  taking up  the issue  without                                                               
delay  and hearing  from the  auditor  as to  whether "these  are                                                               
measurable goals in looking at this preference."                                                                                
                                                                                                                                
2:18:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  said  he  chaired  [the  House  Finance                                                               
Public  Safety  Subcommittee] and  some  of  the questions  being                                                               
asked were  asked of Captain Merrill  (ph), the head of  the VPSO                                                               
program,   [during  the   subcommittee  meetings].     He   asked                                                               
Representative   Saddler   what    information   he   anticipates                                                               
discovering that would  be different from that  which was already                                                               
given during the subcommittee meetings.                                                                                         
                                                                                                                                
REPRESENTATIVE  SADDLER acknowledged  that  the subcommittee  had                                                               
received  general  information  regarding   the  number  of  VPSO                                                               
positions  authorized,  but he  indicated  he  would like  deeper                                                               
analysis of  the following:  the  degree to which the  program is                                                               
succeeding, the reason  for some of the  indirect cost increases,                                                               
the reasons for  turnover, the expenses of training  and how much                                                               
of that  is lost.   Further,  he said  there are  other questions                                                               
beyond the actual  operation of the program.   For example, there                                                               
is the possibility of looking  to the federal government or other                                                               
sources for funding  for the program.  He said  there is also the                                                               
question  of whether  there  could  be better  ways  in which  to                                                               
manage  the  program,  either   by  contracting  with  individual                                                               
villages or VPSOs.  He continued:                                                                                               
                                                                                                                                
     Those are  ... higher  level analytical  questions that                                                                    
     you really  can't ask  the department  that's operating                                                                    
     the  program as  it stands  now to  say how  they would                                                                    
     change  it, because  obviously they  believe that  it's                                                                    
     working  the way  it should,  because it's  working the                                                                    
     way  it is.    It's our  job as  the  policy makers  to                                                                    
     consider what may be a better way to implant a policy.                                                                     
                                                                                                                                
REPRESENTATIVE KAWASAKI  asked Representative  Saddler if  he had                                                               
read the 1985 and 2003 audits.                                                                                                  
                                                                                                                                
REPRESENTATIVE SADDLER answered yes.                                                                                            
                                                                                                                                
REPRESENTATIVE  KAWASAKI said  he wished  everyone had  copies of                                                               
those audits, because many of  the questions of the committee may                                                               
mirror  the questions  previous legislatures  had about  the VPSO                                                               
program,  which went  through an  audit process  and "were  never                                                               
listened to."   He expressed his  hope that "this is  not another                                                               
exercise in futility"  and that the Legislative  Budget and Audit                                                               
Committee  uses the  audit recommendations  from  1985 and  2003,                                                               
"which  clearly outline  problems  within the  VPSO program  that                                                               
have still yet  not been corrected."  He said  he supports having                                                               
an audit done, as long as the  auditor believes it can be done in                                                               
a timely manner and "without being  a burden to other, maybe more                                                               
important, audits that are out there."   He said the VPSO program                                                               
represents only 9  percent of the general fund  budget within the                                                               
department,  whereas  in  contrast   the  Alaska  State  Troopers                                                               
represent  75 percent  of the  department's general  fund budget.                                                               
He said he would like to see  the audit done in an "effective and                                                               
efficient and frugal manner."                                                                                                   
                                                                                                                                
REPRESENTATIVE  SADDLER responded  that he  shares Representative                                                               
Kawasaki's desire to not have an  audit done that "will result in                                                               
a report  against us."  He  said, "One of our  presiding officers                                                               
has a very  close, personal interest in the VPSO  program and has                                                               
worked  to extend  it  and  change it,  and  I  think if  there's                                                               
information that  already exists  that can be  used to  provide a                                                               
foundation  ... for  the [legislative]  auditor,  that will  very                                                               
useful and might save time and money."                                                                                          
                                                                                                                                
2:22:57 PM                                                                                                                    
                                                                                                                                
SENATOR  MACKINNON  requested  that the  Legislative  Budget  and                                                               
Audit Committee work  as a team with the auditor  to "start going                                                               
back through departments" and try  "to start implementing some of                                                               
the good work that our auditors  have provided for us."  She said                                                               
she  would look  for public  acknowledgement  to be  able to  "go                                                               
forward  sooner  than later  on  that  process and  work  towards                                                               
prioritizing which departments we might  have in front of us over                                                               
the  next few  months"  in  order to  "ask  why  these old  audit                                                               
recommendations are not being put into place."                                                                                  
                                                                                                                                
2:23:58 PM                                                                                                                    
                                                                                                                                
CHAIR  STEDMAN  indicated that  would  be  the general  direction                                                               
taken  by the  committee  to  avoid doing  audits  "just for  the                                                               
exercise of  doing audits."  He  said this audit will  be brought                                                               
forward by  the Legislative Budget  and Audit Committee  over the                                                               
next meeting or two; however,  he reiterated that the process may                                                               
take about  1.5 years.   He said  he would like  refinements made                                                               
before the  audit request  is passed  to the  state auditor.   He                                                               
further  expressed  his  desire  for  the  committee  to  address                                                               
concerns regarding  the budget process  to avoid ending  up "with                                                               
two budget cycles behind us."                                                                                                   
                                                                                                                                
2:25:36 PM                                                                                                                    
                                                                                                                                
KRIS  CURTIS, Legislative  Auditor,  Legislative Audit  Division,                                                               
Legislative  Agencies and  Offices,  Legislative Affairs  Agency,                                                               
stated that she  had worked with the Department  of Public Safety                                                               
(DPS) and  Representative Saddler  and staff  to help  them craft                                                               
the audit request.   Regarding the question  about evaluating the                                                               
program's effectiveness, she said:                                                                                              
                                                                                                                                
     In considering  what we might  do in order to  wrap our                                                                    
     arms around that very large  question, I believe we end                                                                    
     up  surveying  the  stakeholders to  what  degree  they                                                                    
     believe that  the program is  effective and  what ideas                                                                    
     they may  have in improving  the program.  So,  that is                                                                    
     something that  I don't believe  has ... been  done for                                                                    
     quite some time.                                                                                                           
                                                                                                                                
MS. CURTIS,  regarding timing, said  [the special  audit request]                                                               
would be entered  into Legislative Audit's queue of  audits.  She                                                               
explained that  because there  are four or  five audits  ahead of                                                               
this  one, she  does not  expect  the division  would begin  this                                                               
audit for at least 1.5 years.                                                                                                   
                                                                                                                                
CHAIR  STEDMAN  indicated  that  the  list  of  audits  could  be                                                               
streamlined to speed the process.                                                                                               
                                                                                                                                
2:26:54 PM                                                                                                                    
                                                                                                                                
SENATOR  MACKINNON asked  for information  regarding the  four or                                                               
five audits awaiting the division's attention.                                                                                  
                                                                                                                                
MS.  CURTIS   answered  that  the  Alaska   Mental  Health  Trust                                                               
Authority audit  is being expedited,  and she said that  audit is                                                               
ongoing.   The only audit stacked  ahead of that one  is one from                                                               
Senator Giessel  for the  Board of  Game Advisory  Committee, and                                                               
the division hopes  to start the audit this fall.   The other two                                                               
audits were  requested on  December 2016  and relate  to Medicaid                                                               
and the  Children's Health Insurance Program  (CHIP) travel costs                                                               
and the Gasline  Development Corporation.  Ms.  Curtis added that                                                               
there are two older, backlogged audit  requests.  One was made in                                                               
2009, by  then Senator Davis,  for Matanuska Maid, for  which all                                                               
of the  audit objectives  have been  met except  a report  on the                                                               
disposition of  all property.   She explained that there  was one                                                               
building  that had  not  been  sold up  until  January 2017;  the                                                               
division  can now  report on  the disposition  of that  building.                                                               
She  said  whether a  full  audit  is  done  or a  memorandum  to                                                               
expedite  the process  and use  resources efficiently  will be  a                                                               
decision for  the Legislative  Budget and  Audit Committee.   The                                                               
second  backlogged  audit  request  was made  in  2013,  by  then                                                               
Representative Austerman,  on the  motor vessel  (M/V) Tustemena,                                                               
to determine  problems related  to the  maintenance of  the ferry                                                               
that resulted in  a lawsuit.  She explained that  the request was                                                               
put on  hold until the  litigation was  complete; now that  it is                                                               
complete,   the  division   will  be   coming  back   before  the                                                               
Legislative Budget  and Audit Committee  to discuss the  terms of                                                               
the  settlement and  to  re-ask  the committee  if  it wants  the                                                               
resources spent  to ask the  questions or to terminate  the audit                                                               
request.                                                                                                                        
                                                                                                                                
2:29:24 PM                                                                                                                    
                                                                                                                                
SENATOR  MACKINNON stated  that she  understands that  with older                                                               
requests,  the information  may not  be as  valuable today  as it                                                               
could have been  when the original requests were  submitted.  She                                                               
asked if, of  the Alaska Mental Health Trust  Authority, Board of                                                               
Game  Advisory   Board,  Gasline  Development   Corporation,  and                                                               
Medicaid audits,  there is any  way to "contract out"  the audits                                                               
in order to complete the process in less than a year and a half.                                                                
                                                                                                                                
MS. CURTIS  answered that  hiring an outside  auditor would  be a                                                               
high liability;  it is not  something that can  be done by  a CPA                                                               
firm.  Furthermore, she said  the Legislative Audit Division does                                                               
not have  sufficient funds  to contract out  audits.   She added,                                                               
"In the  past, it's been more  of a consultant you  would hire to                                                               
answer questions and  it wouldn't be an audit  in accordance with                                                               
standards."                                                                                                                     
                                                                                                                                
SENATOR  MACKINNON offered  her  understanding  that the  federal                                                               
government may require documentation  regarding the tardy audits.                                                               
She stated  for the  record that the  backlog of  the Legislative                                                               
Audit  Division is  not the  fault of  Ms. Curtis  or her  staff;                                                               
there has  been a transition  in new information  technology (IT)                                                               
that  has  prevented  "our  staff"  from  moving  forward.    She                                                               
mentioned trouble regarding Medicaid  and all the litigation that                                                               
the state  has experienced.   She inquired whether  the committee                                                               
would be  getting an update  regarding the  ramifications related                                                               
to [the  late audits  and the federal  government].   She offered                                                               
her understanding that "those records are submitted now."                                                                       
                                                                                                                                
2:31:46 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN  said he thinks "the  sure answer to that  is yes,"                                                               
but asked Ms. Curtis to expound upon the issue.                                                                                 
                                                                                                                                
MS.  CURTIS  explained  that  what  Senator  MacKinnon  had  been                                                               
referring to  is the implementation  of the new  state accounting                                                               
system, called IRIS,  which went live in July 2015.   She said FY                                                               
16 is  the first  year in  which the  statewide single  audit was                                                               
prepared using records  from the new system.   She indicated that                                                               
the division  sent out communications and  alerts as notification                                                               
of the  likelihood that information  would not be  available [for                                                               
the legislature]  when it  arrived [in  Juneau] in  January 2017.                                                               
She  said  the  information  was not  available  until  May,  and                                                               
according  to federal  requirement, the  single audit  is due  by                                                               
March 31.                                                                                                                       
                                                                                                                                
MS. CURTIS  expressed her  hope that  the Legislative  Budget and                                                               
Audit Committee  would release that  [single audit] as  the final                                                               
public  document at  today's meeting.    She said  she has  staff                                                               
standing by to  upload it in the [Federal  Audit] Clearing House.                                                               
She  said  she has  been  working  with  both federal  and  state                                                               
agencies about the  release [of the single audit],  and there has                                                               
been  threat  by  the  federal  government  to  withhold  funding                                                               
because  the  audit has  not  been  released.   She  offered  her                                                               
understanding that to  date, the division has been  able to avoid                                                               
that happening,  and hopefully the  division will be able  to get                                                               
it to the clearing house by today.                                                                                              
                                                                                                                                
SENATOR MACKINNON stated  that does answer the  question but does                                                               
not prevent the  extra scrutiny that will be faced  over the next                                                               
few  years.     She  said   she  hopes  the   federal  government                                                               
understands that it  is difficult to implement  technology in the                                                               
Forty-Ninth state.   She expressed appreciation  for the auditing                                                               
team.  She surmised the federal  government would be setting up a                                                               
"variety of scenarios where we're definitely tracked on things."                                                                
                                                                                                                                
MS. CURTIS  responded, "When  you submit  the audit  report late,                                                               
you become a  high-risk auditee."  She said there  are other ways                                                               
to  become  a  high-risk  auditee,   for  example,  by  having  a                                                               
"modified  opinion,"  which Alaska  has  had  in previous  years;                                                               
therefore, the  state is already  a high-risk auditee.   She said                                                               
that  designation  lasts for  two  years  and affects  the  audit                                                               
coverage  required,  but  Alaska  already  has  enough  coverage;                                                               
therefore, [the timing of the  single audit] "will not impact the                                                               
number of federal programs we're required to select."                                                                           
                                                                                                                                
^EXECUTIVE SESSION                                                                                                              
                       EXECUTIVE SESSION                                                                                    
                                                                                                                              
2:35:37 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN announced that the  next order of business would be                                                               
an executive session.                                                                                                           
                                                                                                                                
2:35:49 PM                                                                                                                    
                                                                                                                                
VICE CHAIR JOSEPHSON moved that  the Legislative Budget and Audit                                                               
go into Executive  Session under Uniform Rule 22  for the purpose                                                               
of discussing confidential audit reports  under AS 24.20.301.  He                                                               
asked that  the following individuals  remain in the room:   Kris                                                               
Curtis,  Linda  Day,  Brenda  Tchernykh,  Brian  Blackwell,  Mark                                                               
Lundahl,  Dawn   Borjesson,  and  any  legislators   not  on  the                                                               
Legislative Budget and Audit Committee  and any staff working for                                                               
committee members.  There being  no objection, the committee went                                                               
into executive session at 2:36 p.m.                                                                                             
                                                                                                                                
2:36:26 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:36 p.m. to 4:01 p.m.                                                                       
                                                                                                                                
4:01:19 PM                                                                                                                    
                                                                                                                                
CHAIR STEDMAN  called the Legislative Budget  and Audit Committee                                                               
back  to  order  at  4:01 p.m.    Representatives  Kawasaki  (via                                                               
teleconference),  Spohnholz,  Johnston,   Ortiz  (alternate,  via                                                               
teleconference), and  Josephson and Senators  MacKinnon, Giessel,                                                               
Hoffman   (via  teleconference),   Von   Imhof  (alternate,   via                                                               
teleconference), and  Stedman were  present at  the call  back to                                                               
order.                                                                                                                          
                                                                                                                                
^FINAL AUDIT RELEASE                                                                                                            
                      FINAL AUDIT RELEASE                                                                                   
                                                                                                                              
4:02:53 PM                                                                                                                    
                                                                                                                                
VICE CHAIR  JOSEPHSON made a  motion that the  Legislative Budget                                                               
and  Audit Committee  release the  following final  audits:   the                                                               
Real Estate Commission, the Board  of Martial and Family Therapy,                                                               
the  Board  of Professional  Counselors,  and  the FY  16  single                                                               
statewide audit.  There being no objection, it was so ordered.                                                                  
                                                                                                                                
^PRELIMINARY AUDIT RELEASE                                                                                                      
                   PRELIMINARY AUDIT RELEASE                                                                                
                                                                                                                              
4:03:54 PM                                                                                                                    
                                                                                                                                
VICE CHAIR JOSEPHSON  made a motion that  that Legislative Budget                                                               
and Audit  Committee release the following  preliminary audits to                                                               
the  appropriate agency  for response:   the  Board of  Certified                                                               
Real  Estate Appraisers.   There  being no  objection, it  was so                                                               
ordered.                                                                                                                        
                                                                                                                                
^OTHER COMMITTEE BUSINESS                                                                                                       
                    OTHER COMMITTEE BUSINESS                                                                                
                                                                                                                              
4:04:26 PM                                                                                                                    
                                                                                                                                
CHAIR  STEDMAN  announced  there  would be  an  upcoming  meeting                                                               
before the end of 2017 and another meeting in January 2018.                                                                     
                                                                                                                                
4:05:20 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There  being  no  further  business  before  the  committee,  the                                                               
Legislative Budget  and Audit Committee meeting  was adjourned at                                                               
4:06 p.m.                                                                                                                       

Document Name Date/Time Subjects
9.7.17 LBA Meeting Agenda.pdf JBUD 9/7/2017 2:00:00 PM
9/7/17 Meeting Materials
jbud 072517 0946 AM.pdf JBUD 9/7/2017 2:00:00 PM
9/7/17 Meeting Materials
2017 - LBA Chair Stedman - VPSO Audit request - FINAL after consult with Kris Curtis LBA - UPDATED 8-21-17.pdf JBUD 9/7/2017 2:00:00 PM
9/7/17 Meeting Materials